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We study the role of establishment-specific wage premiums in generating recent increases in West German wage inequality. Models with additive fixed effects for workers and establishments are fit into four subintervals spanning the period from 1985 to 2009. We show that these models provide a good approximation to the wage structure and can explain nearly all of the dramatic rise in West German wage inequality. Our estimates suggest that the increasing dispersion of West German wages has arisen from a combination of rising heterogeneity between workers, rising dispersion in the wage premiums at different establishments, and increasing assortativeness in the assignment of workers to plants. In contrast, the idiosyncratic job-match component of wage variation is small and stable over time. Decomposing changes in mean wages between different education groups, occupations, and industries, we find that increasing plant-level heterogeneity and rising assortativeness in the assignment of workers to establishments explain a large share of the rise in inequality along all three dimensions.

When jobs offered by different employers are not perfect substitutes, employers gain wage-setting power; the extent of this power can be captured by the elasticity of labor supply to the firm. The authors collect 1,320 estimates of this parameter from 53 studies. Findings show a prominent discrepancy between estimates of direct elasticity of labor supply to changes in wage (smaller) and the estimates converted from inverse elasticities (larger), suggesting that labor market institutions may rein in a substantial amount of firm wage-setting power. This gap remains after they control for 22 additional variables and use Bayesian Model Averaging and LASSO to address model uncertainty; however, it is less pronounced for studies employing an identification strategy. Furthermore, the authors find strong evidence that implies the literature on direct estimates is prone to selective reporting: Negative estimates of the elasticity of labor supply to the firm tend to be discarded, leading to upward bias in the mean reported estimate. Additionally, they point out several socioeconomic factors that seem to affect the degree of monopsony power.

The gender segregation of occupations is an enduring feature of the labour market, and pay in female-dominated occupations remains lower than in male-dominated occupations. However, recent changes in the occupational structure have possibly altered the relationship between occupational segregation and the gender pay gap. Women's skills are increasingly in demand, and this is reducing the gender wage gap. We explore this premise using individual-and occupation-level Labour Force Survey and household panel data from Britain augmented with an innovative proxy indicator of productivity across occupations. The wage effects of occupational feminization are not as high as previously shown once this indicator is taken into account. Additionally, we find evidence that such wage effects are evolving into more complex processes, including differing impacts for graduates and non-graduates as well as for employees in graduate and nongraduate jobs. Claims that gender segregation is losing importance as a structuring factor in labour-market outcomes are therefore accurate. However, this applies mostly to women in jobs requiring high-level skills. Segregation continues to lower pay substantially for women in occupations requiring limited skills.

We study competitive equilibria in a signalling economy with heterogeneously informed buyers. In terms of the classic Spence (1973, The Quarterly Journal of Economics, 87, 355—374) model of job market signalling, firms have access to direct but imperfect information about worker types, in addition to observing their education. Firms can be ranked according to the quality of their information, i.e., their expertise. In equilibrium, some high-type workers forgo signalling and are hired by better informed firms, which make positive profits. Workers’ education decisions and firms’ use of their expertise are strategic complements, allowing for multiple equilibria that can be Pareto ranked.We characterize wage dispersion and the extent of signalling as a function of the distribution of expertise among firms. Our model can also be applied to a variety of other signalling problems, including securitization, corporate financial structure, insurance markets, or dividend policy.

This study explores whether potential employers have the same information about worker ability as the incumbent firm. I develop a model of asymmetric learning that nests the symmetric learning case and allows the degree of asymmetry to vary. I then show how predictions in the model can be tested with compensation data. Using the NLSY, I test the model and find strong support for asymmetric information. My estimates imply that in one period, outside firms reduce the average expectation error over worker ability by only a third of the reduction made by incumbent firms.

In many sectors, pay is regulated to be equal across heterogeneous geographical labor markets. When the competitive outside wage is higher than the regulated wage, there are likely to be falls in quality. We exploit panel data from the population of English hospitals in which regulated pay for nurses is essentially flat across the country. Higher outside wages significantly worsen hospital quality as measured by hospital deaths for emergency heart attacks. A 10 percent increase in the outside wage is associated with a 7 percent increase in death rates. Furthermore, the regulation increases aggregate death rates in the public health care system.

Recent laboratory and field experiments suggest that women are less effective than men in a competitive environment. I examine how teachers' performance is affected by a competitive environment and its gender mix. Teachers participated in a tournament that provided cash bonuses based on test performance of their classes. I find no evidence of gender differences in performance under competition in any gender mix environment, or in teachers' knowledge of the programme and in effort and teaching methods. Women, however, were more pessimistic about the effectiveness of teachers' performance pay and more realistic than men about their likelihood of winning bonuses.

In the 1970s, European unemployment started increasing. It increased further in the 1980s, to reach a plateau in the 1990s. It is still high today, although the average unemployment rate hides a high degree of heterogeneity across countries. The focus of researchers and policy makers was initially on the role of shocks. As unemployment remained high, the focus has progressively shifted to institutions. This paper reviews the interaction of facts and theories, and gives a tentative assessment of what we know and what we still do not know. [PUBLICATION ABSTRACT]

The moral economy is a set of institutionalized rules, norms, and values that guide action in market economies. Historically, the norm of wage negotiations has been a central pillar of the U.S. moral economy, but research suggests that this may be changing. In the present study, the authors seek to evaluate whether the norm of wage negotiations is decoupled from the U.S. moral economy. Results of a factorial survey experiment administered to a quota sample of U.S. adults (N = 707) indicate that the norm of wage negotiations is weak: it is largely bipolar, conditional, and of a low to moderate intensity, with disagreement over the norm as well as the circumstances demarcating the norm. These social cleavages, however, do not fall along demographic lines: the character of the norm is comparable across groups. These findings reveal that there has been an erosion of the distributional norms underlying the U.S. moral economy.

We analyse worker self-selection, with a special focus on teachers, to explore whether worker composition is generally endogenous. We analyse laboratory experimental data to provide causal evidence on particular sorting patterns. Our field data analysis focuses specifically on selection patterns of teachers. We find that teachers are more risk averse than employees in other professions, indicating that relatively risk averse individuals sort into teaching occupations under the current system. Using survey measures on trust and reciprocity we find that teachers trust more and are less negatively reciprocal than other employees, and establish differences in personality based on the Big Five concept.